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Shareholders' Equity
 3 Months Ended
Mar. 31, 2013
Stockholders' Equity Note [Abstract]  
Shareholders' Equity
Shareholders’ Equity

AFG is authorized to issue 12.5 million shares of Voting Preferred Stock and 12.5 million shares of Nonvoting Preferred Stock, each without par value.

Accumulated Other Comprehensive Income, Net of Tax (“AOCI”)   Comprehensive income is defined as all changes in Shareholders’ Equity except those arising from transactions with shareholders. Comprehensive income includes net earnings and other comprehensive income, which consists primarily of changes in net unrealized gains or losses on available for sale securities. The progression of the components of accumulated other comprehensive income follows (in millions): 

  
 
 
Other Comprehensive Income
 
 
 
  
AOCI
Beginning
Balance
 
Pretax
 
Tax
 
Net
of
tax
 
Attributable to
noncontrolling
interests
 
Attributable to
shareholders
 
AOCI
Ending
Balance
 
Three months ended March 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains on securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains (losses) on securities arising during the period
 
 
$
122

 
$
(43
)
 
$
79

 
$
(1
)
 
$
78

 


 
Reclassification adjustment for realized gains (losses) included in net earnings (a)
 
 
(56
)
 
20

 
(36
)
 
—

 
(36
)
 


 
Total net unrealized gains on securities (b)
$
823

 
66

 
(23
)
 
43

 
(1
)
 
42

 
$
865

 
Foreign currency translation adjustments
14

 
(4
)
 
—

 
(4
)
 
—

 
(4
)
 
10

 
Pension and other postretirement plans adjustments
(6
)
 
—

 
—

 
—

 
—

 
—

 
(6
)

Total
$
831

 
$
62

 
$
(23
)
 
$
39

 
$
(1
)
 
$
38

 
$
869

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended March 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains on securities
$
578

 
$
200

 
$
(70
)
 
$
130

 
$
(3
)
 
$
127

 
$
705

 
Foreign currency translation adjustments
10

 
7

 
—

 
7

 
(1
)
 
6

 
16

 
Pension and other postretirement plans adjustments
(8
)
 
1

 
—

 
1

 
—

 
1

 
(7
)

Total
$
580

 
$
208

 
$
(70
)
 
$
138

 
$
(4
)
 
$
134

 
$
714

 
 
(a)
The reclassification adjustment out of net unrealized gains on securities affected the following lines in AFG’s Consolidated Statement of Earnings:
 
OCI component
 
Affected line in the Consolidated Statement of Earnings
 
 
Pretax
 
Realized gains on securities
 
 
Tax
 
Provision for income taxes
 
 
Attributable to noncontrolling interests
 
Net earnings (loss) attributable to noncontrolling interests
 

(b)
Includes net unrealized gains of $45 million at March 31, 2013 compared to $33 million at December 31, 2012 related to securities for which only the credit portion of an other-than-temporary impairment has been recorded in earnings.

Stock Incentive Plans   Under AFG’s Stock Incentive Plans, employees of AFG and its subsidiaries are eligible to receive equity awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards. In the first three months of 2013, AFG issued 249,411 shares of restricted Common Stock (fair value of $44.01 per share) and granted stock options for 1.0 million shares of Common Stock (at an average exercise price of $44.01) under the Stock Incentive Plan. In addition, AFG issued 88,602 shares of Common Stock (fair value of $47.12 per share) in the first quarter of 2013 under the Equity Bonus Plan.

AFG uses the Black-Scholes option pricing model to calculate the fair value of its option grants. Expected volatility is based on historical volatility over a period equal to the expected term. The expected term was estimated based on historical exercise patterns and post vesting cancellations. The weighted average fair value of options granted during 2013 was $15.10 per share based on the following assumptions: expected dividend yield — 1.8%; expected volatility — 38.8%; expected term — 7.3 years; risk-free rate — 1.4%.

Total compensation expense related to stock incentive plans of AFG and its subsidiaries was $13 million and $6 million, respectively, in the first quarter of 2013 and 2012.